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Homes in Foreclosure Reported to Hit an All-Time High - 2007-12-15 |
The number of homes in the thirteen county metro Atlanta area being advertised as going into foreclosure hit an all-time high last month, with over 6,000 homes headed to the recent December auction.
Because the process of foreclosure varies from state to state, let's review some of the most frequently asked questions about Georgia's foreclosure procedure:
Q: What does the word "foreclosure" actually mean?
A: In Georgia, foreclosure is the legal process by which a home lender can repossess or auction a borrowers real estate after that borrower fails to make payments as outlined in the original loan documents. Georgia law allows for a procedure known as "non-judicial" foreclosure, which most lenders choose to follow.
Q: What are those loan documents?
A: Typically, the details of a home loan are spelled out in two specific documents that are signed at the settlement table.
The first is the note, which is essentially a formal IOU. This document makes the borrower personally liable for repayment of the debt, and is not recorded at the courthouse.
The second is a security deed, and it pledges the property as collateral for the loan and outlines the procedure for collection and repossession, should that become necessary. Security deeds are always recorded publicly.
Q: When a borrower is late making a home loan payment, how quickly does the lender act and when does the foreclosure occur?
A: Technically, a lender could demand that a borrower cure an event of default such as a missed payment as soon as the payment is late, but most home lenders are hopeful that the borrower will quickly catch up their loan. As a result, lenders often try to work out a payment plan with the borrower so that the lender can avoid having to foreclose.
Q: If the lender can take the house back, why wouldn't they foreclose right away. Can't the lender simply sell the house and get paid off?
A: In Georgia, the borrower is usually given multiple chances to catch the loan up or work out a payment solution. This may involve restructuring the loan or postponing past-due charges. Lenders often lose substantial amounts of money as a result of foreclosure, and would prefer to avoid them if possible.
If all else fails, the lender must advertise the upcoming foreclosure auction in the legal newspaper of the county where the property is located. The ad must appear for four consecutive weeks, and it must contain specific wording. In addition, the lender must attempt to notify the borrower of the sale date by mail.
On the first Tuesday of the month after advertisement, a representative of the lender will conduct a public auction on the courthouse steps. It is then that the house will be sold to the highest bidder for cash. Anyone with the needed funds can participate.
The opening bid is usually from the lender in the total amount of the debt, including attorney fees. Subsequent higher bids, if any, can come from those present. The highest bidder wins the auction and eventually becomes the owner of the house.
Q: What happens to the money?
A: The funds are first used to satisfy the debt to the foreclosing lender. If any is left over, it is used to satisfy junior liens, such as second mortgages of home equity lines of credit. Finally, any remaining funds are given to the borrower.
Q: Is there a way for the borrower to get his house back after the auction?
A: In some states, there is a provision for "redemption" of the property if the borrower pays certain fees and pays back the lender. That is called a "right of redemption." There is no such provision under Georgia law.
Q: What happens if no one bids at the auction?
A: In many cases, the amount owed exceeds the current value of the house being used as collateral. If that happens, the lender will make its opening bid, and then no one else will offer a bid. The lender is declared the winning bidder, and ownership of the house is transferred to the lender. In these cases, the lender will almost always try to sell the house as soon as possible.
Q: So, doesn't the lender come out even after they sell the house?
A: Usually not. If there were enough equity in the house to cover the loan, the owner could probably have sold it and paid the lender off. Likewise, if the house was worth more than the loan amount, it is likely that an investor would have bought the house at auction to try to make a profit.
The fact that the house is now owned by the lender indicates that more was owed to the lender than the house was worth. To make matters worse, lenders incur substantial expenses while trying to sell, such as marketing costs, management and insurance fees, and lost interest payments.
Typically, these foreclosed homes are bought by investors at reduced prices, and in most cases, the lender loses money as a result of the foreclosure. Their total loss can easily run into the tens of thousands of dollars. This is why lenders try so hard to avoid foreclosing on a home.
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Upcoming Events
BUYING FORECLOSURES IN GEORGIA
NEW for 2008: Bank-Owned Home Bonanza
This seminar has been updated and revised for 2008 to reflect the dramatic changes in the Georgia foreclosure marketplace. We are literally facing a flood of foreclosure properties, and there is profit to be made in each and every one of these homes.
Whether you want to build a portfolio of homes for your retirement or you simply want to find a better home for yourself and your family, this program is for YOU.
LAST CHANCE THIS MONTH!!
• Saturday, Oct. 11th, 2:00 P.M. until 5:00 P.M. - Renaissance Waverly Hotel in the Cobb Galleria
This COMPLETELY NEW SEMINAR examines the roots of today's foreclosure meltdown and explains how you can take advantage of this opportunity in your spare time.
Advance Tickets: $69; bring a friend for an additional $30.
Couples share materials.
Detailed information available under the “Seminars” button
This course approved for 3 hours of Continuing Education credit by the Georgia Real Estate Commission.
The Real Estate Investor's Institute will be held at Emory University on
November 22, 23 & 24, 2008. Make plans to attend.
Detailed information is
available under "Seminars."
This course is approved by the Georgia Real Estate Commission for 12
hours of Continuing Education Credit. Agents must bring license number.
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